tv Nightly Business Report PBS April 10, 2015 6:30pm-7:01pm PDT
this is "nightly business re sue herera. general electric plans to sell off most of its ge capital unit. what does it mean for the new ge and investors in one of the most widely held stocks anywhere? no stone unturned. how black stone, the private equity giant is becoming a real estate behemoth as well and a little la. our market monitor has some of the best names to own, the ones investors love to hate sometimes and she's got names for you. all that and more for friday, april 10th. good evening, everyone and welcome. sue herera has the evening off. well talk about ending the week with a bang. general electric is continuing its makeover and in this case it's an extreme makeover.
last night we told you the widely held dow component was close to a deal to sell its real estate portfolio. what we didn't know is that that was just the beginning. the company is planning to essentially shed its entire finance unit. the first move is a $26.5 billion sale of most of its real estate and mortgage portfolio to blackstone and wells fargo. but ge is not stopping there. the company will dramatically slim down ge capital over the next few years and buy back $50 billion worth of stock. that buyback ties apple for the biggest single buyback ever. wall street loved the moves and sent shares higher by about 11% on the day. mary thompson has our look at the deal and the new ge. >> reporter: in its most aggressive move in 14 years of ceo, jeff plans to slash the ge finance unit. once a strength for ge seen as a
drag now. >> we felt from an investors' standpoint this was the right time. >> reporter: right time because low rates mean yield hungry buyers pay for these assets and selling them mean ge may be clear to come out from a stricter regulatory regime mandated for ge's systemically important. the news sent the stocks on a 52 week high earning praise from investors. >> i think ge is doing the exact right thing. now you can understand the company. >> reporter: the structure puts ge on the path to be a pure industrial play a company providing tools to build out infrastructure around the globe and one that won't be penalized for its financial business. >> at the end of the day, being able to rerate the company is a premium industrial company with a very small financial service business that really complements the industrial assets is really a value-creating move. >> reporter: struggle to generate stocks up 30% since he took the helm. >> i think he heard the critics
and he's answering them. >> reporter: by 2018 90% of ge's profits come from its core industrial businesses including power and water, aviation health care oil and gas and transportation. that's up from just over 50% last year. profits from finance drop as ge unloads $300 billion in assets including global and consumer lending bids overbusinesses over the next two years. client jet engines of energy and health care equipment. even as it undertakes the massive restructuring, ge expects to be profit forecast for 2018. it will make up for lost of ge capital by growing profits at its industrial businesses and with a record $50 billion stock buyback program that will siflgtly shrink its shares standing. all moves designed to keep inves engaged with the
123-year-old company starts yet another new chapter. for "nightly business report," i'm mary thompson. >> so why would a company want to part with a unit ge capital, that accounts for two out of every $5 it earns in profit? bill george is here to discuss. he's former ceo of metronic. take us in the mind of the ceo, in the board room. why do you do this? >> well i think tyler, jeff is taking ge back to roots. ge transportation health care industrial businesses where it can use it. research development, capital expenditures and by the way, its financing clout on industrial roles. but the consumer finance business has gone the wrong way. it's very hard to get good returns today in the new regulatory era we're in this field and if you're not a bank the size of wells fargo. and i think that getting rid of the real estate these things really made ge into a
conglomerate and i think the market couldn't figure it out and customers couldn't figure it out. the conglomerate model, we didn't challenge it because he was managing so well but i think today, it doesn't make sense and so i think the unity it has makes a lot of sense and keeping the financing. jeff came to mittvisit me when he was in charge of the imaging business and said we use the financing to support our sales of mris and cat scanners and all the equipment they sell. the same as jet engines and the energy business. they use these very effectively but that's different than the consumer finance and i think ge got way too dependent when jack was ceo. the only question i have to ask is why didn't he do it sooner? >> a lot of people ask the same question particularly in light of what's been an underperforming stock price. in this case bill it gives them more sort of strategic focus. smaller is better.
they won't have as much profit now. they're hoping i guess, they'll have it later on. do you see, you mentioned the medical imaging business. sochl some people see once did in a company focused on industry and infrastructure. >> i wouldn't agree with that. i think ge should be doing more not less than health care. i think the opportunities, tyler, as a growth industry health care is where it's at. energy is too, by the way. and i think using their technology and their innovation and the kind of things he did in the energy side ecoimagination same thing with health care tyler. that's the sweet spot. this is the real ge that just is taking the company back too and i think that's exactly where they should be and they should be pushing large equipment. that's what ge does. this is what they do well and i see no reason why they wouldn't continue to try to do this around the world and build global business in a rapidly growing market. >> this is now jeff imel's
company totally. he got rid of nbc universal that produces this program and now a big part of the welch legacy of the old general electric right? quick thought? >> well i think jeff went too slow on that but i think he feels he needed to bring, he knows the lead time to develop the innovation new ideas, and he wanted to go to a slower transition. i wish he had done it sooner than 13.5 years, certainly in the nbc side. a few years ago, i thought get rid of nbc and that made sense. this makes sense. could have done it a few years earlier but basically restructuring the balance sheet too. he's downsizing and taking a lot of capital off the table. >> all right. >> and doing a lot in that regard and giving shareholders something closer to industrial high-tech pure play and that's where jeff wants to go his background and i think it's the absolute right thing to do because most of ge's executives
come out of these fields. >> yes. >> and so i think you'll see the company be much more of a success in the future and i think its customers its employees and shareholders will rally around the new ge not being caught up in the ego being the biggest, caught up in being the biggest niche in their fields and having an integrated strategy as they have. >> thank you so much for being with us always enlightening bill george with harvard business school and former ceo. what does this mean for investors? follr rbc capital markets. dean what do you think? they fell in love with the move today. are they going to stay in love? >> well tyler, you don't see big cap stocks of ge's size going up almost 11%. there was, this was a catalyst and i think what you're also is important of what happened today is there are so many pms that
were under way for ge and it's a big index stock. suddenly you get a catalyst and it causes you switch from greed into fear and you had almost panic. we call this a melt-up. stock was almost 10 times its average daily volume. >> how do you feel about this stock three years down when they have exited some of the businesses that bill and i were just talking about? >> well it was actually, bill was making great points. if you project and follow through this whole plan and do these buybacks you pare ge down with big industrial service based businesses with a healthy dividend and investor friendly and derisk the company significantly. i think that's what the marke telling you today. >> what rating do you have on the stock and i note that you had earlier a $28 share price
target. will you revisit that? >> sure. we have an outperform rating on ge and interesting in the beginning of the year, we named ge as our top pick of stocks most likely to make a transformational portfolio change. what surprised us and i think what surprised the market is they did it all at once. it wasn't just the next phase. so we're looking at this now and price targets under review. we still feel very good about how the company has laid out this plan. if you want to project out three years, you start looking at a stock that's growing 10%, pays 3.2% dividend yield that has been derisked that feels in this low growth environment really nice. >> i should point out you had impression calls on general electric earlier this year in terms of transforming transaction. >> thank you, tyler. >> thank you dean. good to be with you. >> thank you.
blackstone the private equity firm one of the buyers of ge's real estate today and the company made another deal buying real estate trust excel and that expands as a real estate powerhouse. diana olick takes a look. >> reporter: there i real black stone doesn't touch. landmark offices, apartment buildings, single family rental homes, medical buildings, student housing, hotels. $81 billion worth of investor capital under management. now as part of ge's health cleaning blackstone adds $14 billion more. >> in this market environment, it's very difficult to place a lot of money all at once and given the amount of money that someone like blackstone is clearly looking to put to work in the market it would be very difficult to cobble together a portfolio of that magnitude one or two properties at a time. >> reporter: about $3 billion in office properties in chicago, southern california and seattle as well as billions more in
commercial property than mortgages across europe australia, and mexico. >> they must have a relatively bullish outlook on the sector overall, otherwise we wouldn't be talking about the kind of dollar volumes they're clearly talking about in this case. >> blackstone has been in the news most recently in its hotel maneuvering after its $26 billion leveraged buyout of hilton worldwide in 2007, it took the company public again late last year. that was just after the sale of san diego's landmark hotel del coronado last summer which real estate chief john grey described to jim favor. >> we have to sell. we share models buy, pick sell it. >> reporter: but now the nation's largest landlord in the single family rental market with more than 45,000 properties under its invitation homes and continues to buy distressed properties albeit at a slower pace. >> if the peak were $150 million
a we blackstone is taking advantage of a real estate market still in the early stages of recovery with the exception of red hot apartments most sectors still have a long runway ahead. with plenty of potential for profit. for "nightly business report," i'm diana olick in washington. back above 18,000 that's where the dow jones industrial average ended today. and it largely had ge to thank for it. the dow jones industrial is 98 points to close at 18,057. nasdaq grows 21 points to 5,000 again and s&p 500 notched a gain of 10 points and that puts it back above 2100. for the week all three indexes were up more than 1.5%. well it could well be the highest level meeting between the two countries in more than 50 years. president obama coming face to face with cuba's leader raul castro at a summit in panama. michelle caruso-cabrera has more on this historic moment. >> reporter: the president arrived in panama last night and
learned today he spoke with raul castro over the phone on wednesday and that he and castro are expected to see each other at the opening dinner that begins tonight at 9:00 p.m. tomorrow is the big event th two are expected to hold a discussion though not an official meeting. >> we certainly do anticipate that they will have the opportunity to see each other at the summit tomorrow to have a discussion. so we will keep you updated as to any interaction between the leaders. >> reporter: this wouldn't be the first time the two have met. they shook hands briefly in september of 2013 when both in south africa for nelson mandela's funeral. this will be the first time they're together since they announced the decision to reestablish diplomatic relations in december. one of the issues cuba's inclusion on the state sponsored terrorism. removing cuba one of the changes to pave the way for reopening of embassies that have been shut
for 54 years and make it easy for banks around the world to do certain kinds of financial transactions with the sanctioned island and just last night, the state department officially recommended removing cuba from the list. it's been on the list since 1982 one that provided sanctuary to mark rubls and members of ata a vast separatist movement in spain. others iran sudan and syria. raul castro is the first cuban leader to attend the summit of the americas because the u.s. has historically opposed a castro attending the event. we are already seeing changes and hemisphere. michelle caruso-cabrera for "nightly business report." >> one person a long supporter of improving relations with cuba is hillary clinton and the former secretary of state and first lady is expected to announce on sunday that she will enter the race for president in 2016. it is believed clinton will make her announcement via social media. coming up on market monitor,
loves cost cutting companies. a couple names to get you at least 20% over the next few years. the apple watch hits stores for the first time today. not that you could buy one at a store. preorders only and those had to be made online but in the store you could get a chance to se try one on put it through the paces and by all accounts, the watch appears a success. within hours, most if not all models seem to be totally spoken for. if you want one, now at june at the earliest. china, top of the line model that costs in the neighborhood of $20,000 took less than an hour to sell out. around the world, people lined
up to test out the new gadget. >> we've come to see the watch. >> i ordered the watch last night at like 3:15 a.m. >> we hadn't bought one but probably going to come back and get one. >> my kids are asking for iwatches and i'm like no. >> like an iphone, updates every year. >> some people are skeptical now but time to come i think everyone will have one. >> shares of smantic rallying on a late report. that's where we begin tonight's market focus. the company reportedly exploring a sale of the veritas cyber company unit that could fetch more than $8 billion. shares were 5.5% higher that finished at $25.58. new details tonight on ebay's split from its paypal unit. the two companies will still be interdependent on one another even after they split. ebay agreed to not create own payment system for five years after the split and paypal won't
create an online marketplace. so there. shares up a fraction to $57.34. amazon one step closer apparently to its dream of delivering items with drones. the company won federal approval to fly drones and there are a lot of restrictions. they can't fly higher than 100% faster than 100 miles per hour that's pretty fast and have to stay within the operator's line of sight and have to be during the day and private property so the company still has a long way to go before they can fly you your next shipment of food. shares off a fraction to $382.65. nokia expanding sale of maps business. uber and the private equity business valued $2 billion. shares popped today 4% to $8.06. shares of tech mira higher on approval of fda approved drug.
clinical trial of an ebola treatment drug. last july regulators put the drug on hold until more could be provided on safety and efficacy. stock popped to $18.19 for the close. and our market monitor tonight has unloved stocks she thinks investors should own in their portfolio. she's diane with $180 billion under management. hi dianna. good to have you. >> nice to be here. >> first, your overall view of the market at today's levels of two weeks in a row of gains. haven't seen that in quite a while and back above 18,000 close to 5,000, 21,000 on the s&p. >> i was glad that the market paused during the first quarter to let the commodity prices sink in and let companies figure out how they were going to react and now, i think that we're going to be very interested to see what the first quarter earnings
brings and i think the market is stronger from here. >> what do you think first quarter earnings are going to bring and will the rising dollar be the excuse dejour? >> i think the dollar will have an impact but when we talk to companies with overseas sale much have a stronger europe or japan to sell products to. >> let's move on to some of your picks. you liked ge before let the record show own it before today's news. do you love it even more now? >> i do. i would hardly -- it's one of the largest positions. we still believe there's at least 20% upside. it's selling at 2.2 times, price the book and it's now reaching the point where in terms of dollar prices and it hasn't seen since the crisis. >> you must feel very good today because it's been a long wait for ge. >> i feel good for our clients. >> all right. good enough. let's move on to your next one, which is another long-time unloved stock and that's citi. >> yes. and that isn't having much love this year, but we think it too
is continuing its restructuring plans in terms of asset sales and central america and eastern europe. and trading below book value. and so while, you know, it passed the c card the stress test earlier this year we think it has room to run over the next two years. >> and third is chesapeake energy. a stock with either a history or a past. >> we're gingerly pacing our investments in chesapeake right now. it's trading below price to book. generally a&p trade better on cash flow and trade 2.5 times price to cash flow and what i feel good about is that it has over $8 billion of money in the bank so it can wait out long-term low commodity environment. >> is your investment in chesapeake an expression of bullishness about the sector broadly or about the particulars
of this company? >> we have been underweight energy for most of 2014 and continue to be for 2015. we want to take opportunities that the market is presenting like chesapeake. >> diane, thank you very much. great picks and thanks for moving quickly through them. we appreciate it. >> thank you, tyler. >> diane jaffey. netflix, the lifted shares of the video streaming service the notes saying it doesn't agree with the competition concerns. reflected in the stock price. shares rose about 3.5% to $454.67 on netflix. citi adding general motors sending shares higher today. recent pullback as a buying opportunity and said the company has very strong fundamentals. shares up slightly today to $36.57. coming up breaking up can be hard to do but some visionaries are trying to ease the pain of divorce. trying to build a .
here is what to watch next week. busy week. earnings season in full swing. the biggest part of it the big banks start reporting early in the week. j.p. morgan wells fargo and many many more. the federal reserve's beige book, love that beige book wednesday and could offer insight on the health of the economy. on the data front, a ton of potentially market-moving reports including retail sales, housing starts jobless claims and those, folks, are some of the highlights of next week's agenda. and finally tonight, divorce
can be a messy business but as jane wells tells us some people are turning that messy business into good business. >> reporter: the luxurious gid di and putnam in saratoga springs is a favorite spot for weddings and the spot that katherine and johnathan who don't want their last names used got divorced. >> it definitely suited our needs. we have children and early on in the process, we made a decision to be the best parents possible. >> reporter: the resort is the first u.s. venue for the divorce hotel. already a successful company in the netherlands. its purpose? low priced quickie divorces for ten grand. check in marry on friday and check out, divorced on sunday. >> we launched it in december of 2014 and since then we've done 12 divorces. we just finished our 12th yesterday. >> reporter: this isn't the only unusual business in the divorce industry. another company will finance your divorce battle in exchange
for a piece of your settlement assuming you get one. balance point divorce funding created by stacey knapp who funded it with her own divorce settlement. >> we haven't lost money on a case yet, so it will happen. i am sure it will. >> reporter: with balance point, a lower estimates how much a divorce will cost knapp funds it in portions and the more she invests, the higher her percentage on the back end but never goes above 25%. she won't, however, fund everyone. >> i've actually had somebody say to me i won't settle ever. and i said really nice meeting you. i can't do mig for you. because at the end of the day, it has to be about business because i have investors to answer for. >> reporter: those running the divorce hotel agree this is only for people who want to end things quickly and relatively painlessly. >> it was nice to get away for a weekend in the beautiful setting where you can relax, get away from family friends, and really focus on what needed to be done. >> reporter: and though it can
be romantic spending the weekend here no one has had second thoughts. >> every couple has left saying they've gotten along better than they ever have but not getting back together. they've made that decision. >> reporter: for "nightly business report," i'm jane wells. >> heartbreak hotel maybe. the divorce hotel. all right. that's it for "nightly business report" for tonight. i'm tyler mathisen. thanks so much for watching. we hope you all have a really good weekend and we'll see you back here on m
ay ♪ ♪ it doesn't really matter if you're old and grey ♪ ♪ it's all right, i say, it's okay ♪ ♪ listen to what i say ♪ ♪ it's all right, we're doing fine ♪ ♪ it doesn't really matter if the sun don't shine ♪ ♪ it's all right, i say, it's okay ♪ ♪ we're getting to the end of the day ♪ are you the guy that reported it? yeah. how long was she gone? about 3 days, is it? ( knocking on door ) miss barker?